Outline of the Ruling Party’s Tax Reform for Fiscal Year 2026
This article was automatically translated.
The recently announced 2026 Ruling Party Tax Reform Outline includes revisions to the "Special Taxation for Foreign Members (PE Taxation Special Provision)"—a policy proposal item from FinCity.Tokyo. The relevant section is as follows.
The specific revisions include raising the upper limit for the equity ratio requirement from less than 25% to less than 50%, achieving a revision that promotes global equal footing in the taxation system.The previous PE taxation special provision requirements, due to their strictness, had acted as a barrier to LP investments in domestic funds by overseas investors. This amendment reduces the barrier to LP investment participation, raising expectations that even larger-scale global capital will be invested in Japanese SMEs.
We extend our sincere gratitude to our members, Diet members, and relevant administrative agencies for their support and cooperation in realizing these measures. Our organization will continue to actively engage in policy advocacy to realize "Tokyo as an International Financial Center."
Outline of Tax Reform for Fiscal Year 2026 (Excerpt, Page 134)
https://storage2.jimin.jp/pdf/news/policy/212129_1.pdf
| V. International Taxation 3. Other (National Tax) (1) Regarding the special taxation rules for foreign members, the following measures will be implemented. ① Revise the requirements for applying this special provision as follows: ( a) Regarding the requirement that the shareholding ratio in the investment partnership's assets be less than 25%, raise the shareholding ratio of a limited partner in an investment partnership that establishes a specific committee composed of its limited partners, etc., to less than 50%. (b) Regarding the requirement that the investor not engage in the execution of investment partnership business, the scope of acts excluded from approval for business execution will be limited to approval of conflicts of interest transactions (currently: approval of self-dealing transactions, etc., by persons executing the business). ( c) The requirement that the investor not have permanent establishment income other than permanent establishment income related to the investment partnership business will be abolished. ② In conjunction with the amendments in ① above, the required entries on the special application declaration form, etc., will be revised, and other necessary measures will be taken. |